“Sir, Jio Nahi Chal Raha”: How Worried Should We Be About India’s Telecom Sector?

We no longer change the topic when someone asks us for our Wi-Fi password. We are even closer to acquiring that elusive 5th G. But the truth is that behind all the rosy consumerism, there is a dark financial tale playing out with the promise of a sinister ending.

W

e’ve lived through some dynamic times these past two decades. From the screeching, scraping agony of the 56Kbps modems, we now pluck Wi-Fi signals from thin air. Data now flows freely from nearly every outlet, as unlimited plans become more common with each passing month. No one tries to change the topic when you ask for their Wi-Fi password anymore.

As consumers we’ve visually experienced the telecom evolution through the media. We watched as Hutchinson (now Vodafone) took a questionably bred canine and turned it into a national icon, resulting in a breeding frenzy for pugs. We giggled as ZooZoos announced the arrival of 3G in India. We prayed for mercy under the angst-ridden rants of the Airtel girl, and later watched befuddled as she calmed down between the overs of subsequent cricket matches. With each ad campaign, we were a little more spoilt, a little more aware of how much there was on offer.

The truth is that behind all the rosy consumerism, there is a dark financial tale playing out with the promise of a sinister ending. The arrival of Jio has only worsened this.

Even before Jio turned up like a bully on the playground, telecom companies were reeling under mountains of debt. The way the industry works is such that if you don’t invest forward in technology, you may as well dismantle what infrastructure you have and get a head start into the scrap metal business. Between the 2G and 3G auctions, the other players – Airtel, Idea, and Vodafone – took on so many loans that hiking tariffs seemed the only way they were going to survive. Around this time, Mukesh Ambani jumped out from behind a nearby telecom tower yelling, “Dhan dhana dhan, bitches!” and Jio has been making life miserable for its competitors ever since.

The reason Jio was able to do all this goes back to the fact that they come from an industry that makes telecom look like a fun hobby, rather than an actual business. We usually refer to this as “deep pockets” – something that Reliance’s petrochemical business allows for. Imagine a kid runs a lemonade stand and his neighbour across the road – a full-grown man with a beard and a proper job – decides he also wants to sell lemonade. The man is happy to lose a few thousand rupees in his pursuit to corner the neighbourhood lemonade market, which he eventually does by giving the lemonade away for next to nothing. The child goes away crying, vowing to never start a telecom company (he does end up starting an airline, but that’s another story altogether). This, in a nutshell, is how Jio has trampled on the rest of the industry. By slashing tariffs (indeed, offering them for free initially), Jio has not only made it impossible for other players to recoup their 2G, 3G, and 4G investments, they have made it even tougher for them to move forward and acquire that elusive 5th G.

We usually refer to this as “deep pockets” – something that Reliance’s petrochemical business allows for.

In case anyone is wondering how Jio is actually making a profit in all this, they really aren’t. True, they have turned an “operating profit” this past year, but that’s because of some nifty accounting calculations (as if we would expect anything less from the crafty lads at Reliance). If you build a bridge and charge people for crossing over, it looks like you’re raking in the cash, as long as you ignore what it cost to build the bridge in the first place. They have also benefited tremendously from a TRAI ruling slashing how much telecom companies can charge one another for piggybacking of each other’s infrastructure. As a relative newcomer, Jio needs to piggyback a lot more on other networks than they do on Jio’s. Getting favourable rulings from authorities is, after all, another Reliance specialty.

But what does this mean for consumers? Surely offering rock-bottom tariffs is a good thing for us. After all, the airline industry is also tottering under colossal losses and no one complains. Competition has driven airfares so low that rich and poor alike now get to be abused by Indigo staff. It’s the kind of equality we always dreamed of.

The way Jio is moving, it looks like they might be the only private player in the Indian market within the next five years. The state-run firms will hobble along as they have, while the other private players will either sell out (like Reliance Communications did) or fade away in obsolescence. The Vodafone-Idea merger was a marriage borne out of the desperation to survive the Jio onslaught, although it does not seem to have helped tremendously. Two drowning swimmers don’t exactly become one Michael Phelps just because they cling to one another.

From a purely economic perspective, this should worry us. Reliance is not a company prone to altruism. Once they rule the roost, they will prioritise profitability and shoo away competition with the rabid enthusiasm of a Sabarimala priest. Given their expertise at managing regulators, it is unlikely that any new entrants would be welcomed easily. Tariffs will increase and the threat of MNP will be rendered largely impotent.

Reports surfaced this month of Jio practicing its own brand of censorship, despite TRAI ruling in favour of net neutrality.

Equally vexing is the issue of net neutrality. Reports surfaced this month of Jio practicing its own brand of censorship, despite TRAI ruling in favour of net neutrality. The lightning quick speeds and easy data have made the internet a wonderful place. Streaming services and online gaming are more accessible than ever.

But just like that clear-eyed photographer at Isha Ambani’s pre-wedding shoot, who yelled “Sir, Jio nahi chal raha”, keep an eye on the horizon. If things keep going down the same path, you might not be too happy with the videos and games you’re allowed to stream and play.

Related Content

The layoffs at Buzzfeed and HuffPost – both established leaders in digital publishing – imply that the field is not in the health most people thought it enjoyed. What options are left for news companies looking to survive? Digital journalism might have been hit hard, but it is not dead – yet.

Like a high-school crush, we’ve allowed Apple to set its terms, offering us very little in the bargain. So when the company announced expected decline in sales, we rejoiced. Maybe now they can start asking questions like, “Why did we laugh at that customer when he asked for a discount?”

In the last two years, more than 30 deaths have been linked to fake WhatsApp forwards in India. After the government warned WhatsApp to "take accountability" for the unchecked spread of fake news, it set off to make amends. But are they enough?

Netflix denied reports of self-censorship, but this may be our reality sooner than we think. Just like the free press, the free internet is also under threat. And this might deprive us of access to information and entertainment that our governments don’t want us seeing.